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Volume 7 - Number 18

August 29, 2014

FHA Bars Post-Payment Charge on Prepaid Loans

The FHA has issued two final rules enhancing consumer protections – one prohibiting lenders from charging additional interest on FHA-insured mortgages that are paid in full and another ensuring that borrowers of adjustable-rate mortgages receive earlier notice of rate changes. Both rules were published in the Aug. 26 Federal Register. The first rule eliminates the practice of charging the borrower a full-month’s interest even if the mortgage is prepaid in full before the end of the month. It adopted the proposed rule, which was issued for comment on March 13, 2014, without change. Effective Jan. 21, 2015, charging borrowers post-settlement interest, which is broadly defined by the Consumer Financial Protection Bureau as a “prepayment penalty,” will be prohibited for all FHA single-family mortgage products and programs. In the rule’s preamble, HUD said it expects lenders to ...

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